Cynosure, Inc. v. St. Paul Fire & Marine Insuran

• Court: Court of Appeals for the First Circuit
• Decided: May 12, 2011
• Docket: 10-1119
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 10-1119 CYNOSURE, INC.

Plaintiff, Appellee,

v.

ST. PAUL FIRE AND MARINE INSURANCE COMPANY AND ST. PAUL GUARDIAN INSURANCE COMPANY,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

Before

Lipez, Circuit Judge, Souter, Associate Justice,* and Selya, Circuit Judge.

Charles E. Spevacek, with whom William M. Hart, Damon L. Highly, Meagher & Geer, P.L.L.P., Michael F. Aylward, and Morrison Mahoney, LLP, were on brief, for the appellants. James T. Hargrove, with whom Laura E. D’Amato and Goulston & Storrs, P.C., were on brief, for the appellee.

May 12, 2011

* The Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation. SOUTER, Associate Justice. This is a declaratory judgment

action to determine coverage under a commercial policy insuring

against liability for injury caused by advertising. The plaintiff

Cynosure, Inc., is the defendant in an underlying civil action

charging it with responsibility for sending commercial fax messages

“without consent from the recipients” in violation of the Telephone

Consumer Protection Act, 47 U.S.C. § 227(b)(1)(C). Cynosure’s

insurers and the defendants here are St. Paul Fire and Marine

Insurance Company and St. Paul Guardian Insurance Company, which we

will speak of singularly as “St. Paul.” It denied that the

relevant policies’ coverage for “making known to any person or

organization covered material that violates a person’s right of

privacy” extends to liability under the Act. It explained that the

policy language applied “where an insured makes known to others

covered material that violates some other person’s right of

privacy,” but not in the circumstances of the underlying action

alleging that the recipient of a fax had thereby suffered injury to

privacy of his own.

This ensuing request for declaratory judgment joins a line of

cases addressing whether policies insuring against liability for

violating privacy by advertising activity mean privacy understood

as repose undisturbed by commercial intrusion (and thus liability

for violating the Act), or privacy as freedom from disclosure to a

third-party recipient of information that the subject of the

-2- disclosure claims an interest in not having divulged. Compare

Summit Loans, Inc. v. Pecola, 265 Md. 43, 288 A.2d 114 (1972)

(hundreds of harassing phone calls violate the recipient’s right to

privacy), with Alberts v. Devine, 395 Mass. 59, 479 N.E.2d 113

(1985) (physician’s disclosure of medical information gained

through the professional relationship violates the patient’s right

to privacy). We hold that on a fair reading of these policies,

they refer to disclosure, not intrusion, so that liability for

violating the Act is not covered.1

There is no question that Massachusetts law governs in this

diversity action, and the district court rested its decision in

favor of coverage on the opinion of the Supreme Judicial Court of

Massachusetts in Terra Nova Ins. Co. v. Fray-Witzer, 449 Mass. 406,

869 N.E.2d 565 (2007).2 The policy construed in Terra Nova covered

advertising liability for “publication of material that violates a

person’s right of privacy.” Id. at 569. The Court applied the

common rule that ordinary, plain meaning governs the analysis of

insurance contract terms, along with the corollary that ambiguity

1 Summary judgment orders are reviewed de novo. Fithian v. Reed, 204 F.3d 306, 308 (1st Cir. 2000). 2 The substantive law applied in Terra Nova was actually that of New Jersey, which the parties stipulated was identical to the law of the Massachusetts forum. Terra Nova Ins. Co. v. Fray- Witzer, 449 Mass. 406, 869 N.E.2d 565, 570 (2007). While the Court did not expressly approve that stipulation, the interpretive principles applied leave no doubt that the analysis does represent Massachusetts law.

-3- in the language as it would be understood by an ordinary insured is

construed in favor of coverage. Id. at 571-72. Because it found

“the term ‘right of privacy’ to be ambiguous [as to the

alternatives of intrusion and disclosure] in the insurers’

policies,” id. at 573, it held that liability for violating the Act

was covered.

It is not that the district court thought that the particular

result reached in applying the Massachusetts interpretive rules in

Terra Nova necessarily governed the result in a case like this.

Finding ambiguity in “publication of material that violates a

person’s right of privacy” does not imply the same conclusion about

“making known to any person or organization covered material that

violates a person’s right of privacy,” and the Massachusetts Court

was careful to say that it found “right of privacy” ambiguous in

the policies then before it, not categorically. But neither did

the district court think that state law left the scope of the

making-known term in limbo, for it saw a clue in Terra Nova’s

footnote 12: “Several courts have interpreted identical or similar

policy language to mean that unsolicited facsimile advertisements

constitute advertising injury.” Id. at 574 n.12 (citations to

eight cases omitted, as are citations to four further cases, placed

in a separate paragraph, that the Court noted as reaching “the

opposite conclusion.”) Although the footnote did not explain the

scope of “similar policy language,” the district court understood

-4- the phrase to extend to a “making known” provision like the one

here.

Counsel for St. Paul, however, calls our attention to several

other details of Terra Nova that point away from reading the

footnote as deciding this case. Seven out of the eight cases in

the string citation following the reference to “identical or

similar policy language” dealt with a “publication,” not a “making

known,” policy term. The remaining case involved a policy covering

“invasions of rights of privacy” with no further definition of the

term. See Universal Underwriters Ins. Co. v. Lou Fusz Auto.

Network, Inc., 401 F.3d 876, 879 n.2, 882-83 (8th Cir. 2005). And

although three “making known” cases were included in the subsequent

citation of cases that “reached the opposite conclusion” from Terra

Nova, the placement of those cases in a separate footnote paragraph

at least raises a question whether the Massachusetts Court

understood that “making known” was “similar” enough to

“publication” to call for the same result. In fact, if we go back

prior to footnote 12 of the opinion, the Massachusetts Court

probably answered that question when it distinguished Resource

Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631 (4th

Cir. 2005), as inapplicable because the policy at issue there “was

different from” the “publication” policies at issue in Terra Nova

“inasmuch as it defined an ‘advertising injury’ as ‘[m]aking known

to any person or organization written or spoken material that

-5- violates a person’s right of privacy.’” Terra Nova, 869 N.E.2d at

415 n.10. We therefore think that the Terra Nova Court did not

mean that the “making known” policies here would be treated as

similar to “publication” policies, with the consequence that

Massachusetts law is a clean slate on our issue, and we are

consigned to making our own best guess about the state-law issue

based on the familiar principles of insurance contract

interpretation that the Commonwealth follows.

The first of those principles is that we look to the

particulars of the very policy in issue, Allmerica Fin. Corp. v.

Certain Underwriters at Lloyd’s, London, 449 Mass. 621, 871 N.E.2d

418, 425 (2007) (“An insurance contract is to be interpreted

‘according to the fair and reasonable meaning of the words in which

the agreement of the parties is expressed.’”) (quoting Cody v.

Conn. Gen. Life Ins. Co., 387 Mass. 142, 146 N.E.2d 234, 237

(1982)), which requires us to dispense for a moment with the

shorthand classifications of “publication” and “making known,” and

examine the whole provision at issue. When we do, its remarkable

differences from the clause at issue in Terra Nova include not only

its description of advertising injury as occurring by making

certain material known, but its identification of the recipient of

such material as “a person or organization.” By distinguishing

“person” and “organization” and thus providing that a covered

advertising injury occurs when an insured makes known to an

-6- “organization” some material that violates a “person’s” right of

privacy, the policy provision describes a communication to a

recipient (organization) that violates the right of a non-recipient

third party (person). Since a mere intrusion into the recipient’s

repose does not violate any right of a non-recipient, in practical

terms this means that the communication to the recipient violates

the non-recipient’s right of privacy only if it is a communication

about the non-recipient. In order to give rise to tort liability

for violating the third party’s right of privacy, the material

communicated must therefore reveal some fact the third party

reasonably wishes to keep others from being told. See Terra Nova,

869 N.E.2d at 573 n.11 (“Black’s Law Dictionary 1350 (8th ed. 2004)

defines ‘right of privacy’ as ‘[t]he right to personal autonomy,’

or ‘the right of a person and the person’s property to be free from

unwarranted public scrutiny or exposure.’”).

Taking this interpretation to define the limits of the

coverage clauses is consistent with the straightforward meaning of

related provisions in the St. Paul policies covering liability for

other advertising offenses, those that involve libel or slander,

making known material that disparages the products or work of

others, and unauthorized use of the advertising materials of

others; for each offense, the injury turns on the content of the

material communicated to a third party. More significantly,

treating this analysis as definitive is, of course, congruent with

-7- the accepted definition of the verb phrase “make known,” which

other courts have read as commonly meaning “telling, sharing or

otherwise divulging,” Resource Bankshares, 407 F.3d at 641. See

also Melrose Hotel Co. v. St. Paul Fire and Marine Ins. Co., 432 F.

Supp. 2d 488, 503 (E.D. Penn. 2006), aff’d, 503 F.3d 339 (3d Cir.

2007) (“disclosure to a third party or divulging of a secret”).

The relative specificity of “making known” thus distinguishes it

from the more general verb “publishing,” which can be used in

either of two normal senses, to refer to revealing information or

merely to the act itself of conveying material considered apart

from its content. See Terra Nova, 869 N.E.2d at 572, 574. The

upshot is that in contrast to a “publication” provision, there is

no apparent ambiguity in the provision considered here, describing

coverage of liability for making known to one person or

organization something about a third person.

What logic and definition require, syntax confirms. On our

reading, the content of the material communicated (revealing

something about a third party) is necessary for a covered violation

of a right of privacy. Under Cynosure’s argument, on the contrary,

making known alone (to the recipient) would violate privacy without

regard to content. That is, the modifying phrase “that violates a

person’s right of privacy” would refer to “making known,” not to

“material.” But to do that, the modifier would have to jump back

over the words “to any person or organization covered material,”

-8- and that would be not only a broad jump, but an unlikely one at

all, since the phrase “that violates . . .” has an obvious

antecedent in its contiguous neighbor, “covered material.” While

not every commercial contract term may intend to respect this

convention of looking to the most direct antecedent as the subject

of a modifier, the more complex a sentence is, the more likely it

is that the most direct antecedent is the one that commercial

contracting parties understood.3

Aside from that, reading the modifier “that violates. . .” to

refer to “making known” would involve usage so awkward and so

unusual as to make it too unlikely to be reasonable. On Cynosure’s

view, it would have to make sense to read the policy provision

without the reference to covered material, that is, as covering

liability for a “making known . . . that violates a person’s right

of privacy.” But that is not how we speak, and it would be

barbarous to talk or write that way. Cynosure, in other words,

asks us to read the provision as if it were written some other way,

and that is just what the Terra Nova Court has told us the law of

Massachusetts will not tolerate. 869 N.E.2d at 574.

In sum, we believe that the Supreme Judicial Court of

3 Contrast the provision here with Terra Nova’s “publication of material that violates a person’s right of privacy.” “[M]aterial” is again the closest probable antecedent, but “publication,” another noun, is only two words back. It is not so clear that “publication” would not be fairly read as modified, even with “material” in between.

-9- Massachusetts would conclude that St. Paul’s language in these

“making known” policies is not ambiguous, and that the person who

wrote the coverage disclaimer got it right in a nutshell, by

explaining that the policies’ advertising liability coverage

applies only “where an insured makes known to others covered

material that violates some other person’s right of privacy.” Such

is not the basis for liability incurred by sending faxes in

violation of § 227(b)(1)(C), as indeed we understand every case to

have held when dealing with making-known policy language like the

provisions here.4 St. Paul is entitled to judgment.

Reversed.

4 Resource Bankshares Corp. v. St. Paul Mercury Ins. Co.,407 F.3d 631 (4th Cir. 2005); Melrose Hotel Co. v. St. Paul Fire and Marine Ins. Co.,432 F. Supp. 2d 488 (E.D. Penn. 2006), aff’d, 503 F.3d 339 (3d Cir. 2007); St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., No. C06-1056RSL, 2007 WL 564075 (W.D. Wash. Feb. 16, 2007), aff’d, 2008 WL 5077281 (9th Cir. Nov. 25, 2008); ACS Sys., Inc. v. St. Paul Fire & Marine Ins. Co., 53 Cal. Rptr. 3d 786 (Cal. Ct. App.2d Dist. 2007).

-10-